Lesson_62_Internal and External Balance

Lesson_62_Internal and External Balance - Internal and...

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1 Lesson 62 1 Internal and External Balance Macroeconomic policy is aimed at achieving certain outcomes Macroeconomic policy may be constrained by international linkages This lesson introduces the vocabulary and building blocks of macroeconomic policy in an open-economy environment Lesson 62 2 Macro policy aims to achieve two kinds of objectives: Internal balance full employment price stability long run growth Lesson 62 3 External Balance: Less well-defined…can mean different things May mean acceptable current account balance May mean zero in overall balance of payments May mean acceptable value of currency on FX market
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2 Lesson 62 4 What are the policy tools? Fiscal policy Government spending ( G ) Taxes Principles of macroeconomics story: expansionary fiscal policy (increase G , reduce T ) stimulates economy… Lesson 62 5 …however these policies may have implications for exchange rate and balance of payments that may offset the stimulating effect or be otherwise undesirable
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This note was uploaded on 09/14/2009 for the course ECON 340 taught by Professor Leidholm during the Summer '08 term at Michigan State University.

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Lesson_62_Internal and External Balance - Internal and...

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